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Direct Commissioning: Another Way To Stimulate House Building?

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Amidst a housing shortage, and increasing demands for affordable housing, the government, banks and the building sector have been working towards trying to find a solution to what everyone agrees is set to become one of the greatest social and economic issues by the next Election.
One of many measures proposed and started was the government’s Starter Home scheme. Under that, up to 200,000 homes would be build by 2020 and offered to first time buyers under 40 for a minimum 20% discount price.The scheme has met with great support. Despite the support, many agree and admit that a lot more still needs to be done to tackle the housing crisis. This is especially as house prices continue to rise.
Unveiled at the beginning of the year, the latest plan is a direct commissioning of house building. Under the scheme, smaller builders and developers will be able to buy development sites in England with planning permission already in place. The stipulation will be that 40% of these new – builds will need to be “starter homes” aimed at first time buyers. The plans calls for up to 13,000 such homes on public land. Five sites (mostly ex MoD land) have been selected as a pilot.
Under direct commissioning, the government and local authorities will be assuming responsibility for developing land, as opposed to larger building firms and conglomerates. Direct commissioning will also stimulate and encourage smaller builders and developers to get involved in the national endeavours to build more new homes. Communities Secretary Greg Clark MP told BBC Radio 4′s Today programme that the government was “pulling out all the stops to get the country building”. Mr Clark added that the eight biggest building firms accounted for up to 50% of the house building market currently. Direct commissioning would get smaller and medium sized builders involved – which is vital to stimulate more house building overall.
However, outside government, direct commissioining has received not such an enthusiastic response from builders, developers and architects. Whilst all agreeing that more needs to be done to encourage housebuilding, the exact nature and details of direct commissioining leaves a few in the building sector uncertain, particulalry over the planning permission that will go with the land.
In another, related, announcement on this matter, central government announced that a £1.2bnfund will be set up to help developers prepare often underused brownfield sites for house building. This find will help to fast track the building of at least 30,000 starter homes by 2020, according to Downing Street.
Much more needed
The direct commissioning of houses marks another effort of central government to address the ongoing and seemingly never ending issue of affordable housing, and in getting people onto the housing ladder. Affordable housing has dominated social and economic issues for the last few years, either directly or indirectly.
However, despite support the starter homes initiative has proved unwelcome and controversial in equal measure. Will this new scheme proved to help the housing crisis – or merely be a sticking plaster?
Only time will tell. However, it is a clear sign that governemnt and house building sector are serious in their efforts to address this, one of the greatest social and economic issues of our times. It is also clear that it is but one of many initiatives that are needed to address the issue over the next five years.
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Financial Services Compensation Scheme Cuts Coverage

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The Financial Services Compensation Scheme (FSCS), which protects savers against loss if financial firms go bust, has reduced the maximum amount of money that it will reimburse. Previously this level was set at £85,000, but now it has been lowered to £75,000.

The amount covered by the FSCS is reviewed every five years, and each time is set roughly in line with the Europe-wide €100,000 protection limit. The latest change is therefore due to the recent, significant devaluation of the euro against the pound. When the rate was last set five years ago, £85,000 was roughly equivalent to €100,000. Now, however, the fall in the euro’s value means that the sterling equivalent of Europe’s protection level is closer to £72,000.

This has left a number of cautious savers with something of an administrative challenge. Savers who hold multiple accounts with various banks and building societies are now frantically rearranging their finances and moving funds around in order to ensure that they will still be fully protected should any given institution that they hold savings with fail.

In light of the new limit, additional measures have been introduced to give savers the opportunity to rearrange their funds in this way. These measures are the result of major talks between the Bank of England and the finance industry, and give savers who exceed the new limit the option to move some of their money with no penalties as long as they do it before the end of this year. This includes money taken out of fixed-rate accounts and ISAs, which usually involve charges or penalties to interest for early withdrawals.

There are limitations on this allowance, however. Savers cannot choose a “transactional” account – i.e. a current account or other regularly-used, easy access account. Furthermore, if you hold more than one account with the bank or building society you are moving money away from, then they are entitled to decide which account you should take the money out of. However, many major institutions including Barclays, Nationwide, Lloyds and NatWest have said that they will allow their customers to have a choice.

Customers withdrawing money from fixed-rate bonds will need to contact their providers directly in order to avoid early withdrawal penalties, and fill in the appropriate Financial Services Compensation Scheme withdrawal form. Those moving money between ISAs, meanwhile are advised to contact the provider of the receiving account and ask them to manage the transfer to avoid penalties to their tax benefits.

Those who have accounts with more than one of Halifax, Bank of Scotland, Saga, Intelligent Finance, BM Savings or AA Savings should also be aware that these brands all come under a single banking license. As such, if you have money spread across more than one of these brands it will only collectively be covered by a single £75,000 compensation allowance.

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Good Savings Habits you Should Develop

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Putting aside savings is self-evidently a good thing. However, for many people sparing money out of their budget to put aside as savings is easier said than done – at least without buying nothing but essentials and never treating themselves at all.

Whether you have a little or a left of each paycheque, saving effectively is a matter of good habits. If you want to put money aside for the future or simply build up an emergency fund, here are a few savings practices you should try to cultivate in order to get the best results.

Always Save

One of the best habits you can develop is also one of the simplest; make saving into something you always do. Just before or after each paycheque comes through, put whatever is left in your bank account from your previous payday into a savings account (barring a little to cover casual expenses if you choose to do this before your next month’s income actually comes through). Even if this is sometimes a matter of pennies, you should still do it. That way, saving becomes habitual and it will seem only natural for you to carry on the same strict habits in times when you have more to put aside. It also helps you to maximise compound interest in order to make the most of whatever you can put away.

Keep an Eye on Your Spending

Sticking to a specific budget for living is all very well in theory, but it often proves too restrictive in practice. Instead, you should try to make a spending plan or simply keep an eye on what your outgoings are. This will help you identify areas of spending that are simply unnecessary and places where you wouldn’t mind cutting back, meaning that you have that bit extra left for your savings every month. Over time, even a little boost can build up. £10 per month becomes an extra £120 in your bank account by the end of the year.

Put Windfalls into Savings

If you come into a windfall, even a small one, then don’t shove it in your current account to be casually used up or immediately start planning what to spend it on. Consider putting it into your savings instead in case you have need of it in the future. As well as one-off windfalls, this principle works well with things which give you small, occasional payouts outside the income on which you live. For example, if you use cashback websites and occasionally withdraw your funds when you have built up £20 or so, consider putting all of those £20 payments into a savings account instead of your current account.

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2015 Budget is Big News for Savers

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With the election coming up, many might feel that the government was out to impress with the recent Budget. If impressing savers was on the agenda, George Osborne may well have succeeded. The Chancellor delivered a Budget that contained some big news for those who want to make the most of their savings, with the potential to give many of the UK’s savers a definite boost.

Savers will, however, have to wait until 2016 before the biggest boost from the budget will take effect. From April next year, savers who are basic rate taxpayers will not pay any tax on interest earned on their savings up to £1,000. Higher-rate taxpayers will benefit from a similar move, but only on the first £500 of savings interest.

Currently, savers are limited to £15,000 of savings a year that can earn tax-free interest, and then only when tucked away into a specialist interest-free ISA. Under the new system, savings will not be charged tax at all unless the interest earned exceeds £1,000 – which allows for people to hold up to £70,000 at an interest rate of 1.5% (roughly the amount paid by the best easy-access deals at present). The result will be that 95% of people in the country will be exempted from paying tax on their savings altogether, and without the need to utilise a specific type of account.

Those who earn between £10,000 and £13,000 a year will be exempt from paying tax on their savings much sooner. As of 6th April this year, the 10% starter rate on savings interest will be scrapped, leaving people in this income bracket free from tax on interest.

ISAs are also going to see a major shake-up (for the second Budget running), due to take effect at some time this Autumn. One change will allow savers to deposit funds then withdraw them again without harming their ISA allowance. Currently, if you put money in an ISA then take it out again it is still subtracted from your annual allowance as if it had remained in place. This will mark the start of a new breed of “fully flexible” ISA, giving you more choice about how to use your limit and what to do with the money you have deposited.

This April will also see the tax-free limit for ISAs slightly increased. It will rise from the current £15,000 level to £15,240 – giving savers a small boost to their tax-free savings in the year they spend waiting for all savings (up to the £1,000 interest limit) to become tax-free.

 

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Alternative Places to put Monthly Savings

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Interest rates  on savings accounts are currently disappointing. Even the best tax-free ISA will only yield a few percent interest, and getting the best rates requires tying up your money for several years. However, there are a few alternative ways to make the most of your extra cash. Some of the best alternatives to sticking money in a low-interest savings account include:

Investment

Investments are becoming increasingly popular, as many seem to promise much better returns than you would get from even the best savings account. There are several types of investment you may consider. Property is popular, but will likely require a large outlay. You can venture into stocks and shares with much more modest funds, and these can be placed into an investment ISA for tax-free returns. Peer-to-peer lending is also growing popular, and will soon also qualify for tax-free status through ISAs.

However, it is absolutely vital to understand the drawbacks and risks of any investment before placing money into it. In return for higher returns, investments carry risks and you may lose money. The stock market, in particular, can seem attractive but is highly volatile. A wrong move can prove costly.

Mortgage Repayment

Paying off extra on your mortgage will usually yield better results than placing money into a savings account. Think of your finances as a ledger. The money you have is balanced against any money you owe, including your mortgage. Your funds grow as they earn interest, and your debts do the same. As a mortgage (and most other forms of borrowing) will usually have a higher interest rate than any savings account, using a given sum of money to reduce your debt and the interest it accrues will usually push the balance in your favour more significantly than if placed in a savings account. In the long run, you will repay less and end up better off.

The obvious drawback here, however, is that your money is lost. If you need access to your funds in cash, money in a savings account can be withdrawn. Investments can be sold to regain your original funds and hopefully more besides. However, while money used to pay off a mortgage will leave you better off in the long run, you will lose access to your money completely in the short and possibly even medium term. You should therefore not put all of your spare money or savings towards a mortgage, but rather keep back enough cash to ensure your finances remain stable.

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Simple Saving Strategies for Parents

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As all parents are all to aware – raising children in this day and age is becoming ever more demanding – financially in particular.  From even before they are first born, the expenses start totting up… and there is no set end date to the end of your parental duties!

It can be quite overwhelming the thought of being able to do your best financially for your children, though to get you started on some basics, here are a few simple strategies to get in place for families that are growing:

The Household Budget
After carefully totaling how much cash is coming in, you make a budget according to what you could manage and can track the outgoing expenses.  This should always be a first step. From there stop and think what could be done in order to improve the budget? Its usually cutting down on any expenses that seem less necessary.

Have a crisis fund
Make sure that you set aside a fund for any emergency crisis occurring when developing your budget for the family. You never know when the car might need repairs etc, and its essential to have money put aside for the unexpected as then there isn’t the panic of where to get an extra £250 for example. Just £20 a month put aside can almost cover that amount in just 1 year of saving.

Know what things are essential spending when it comes to the kids
Its all too tempting to want to buy every cute toy etc you can get your hands on, but really think about how many toys and clothes your child actually needs. They outgrow both things very quickly, and you’ll find most parents regret the amount they buy afterwards.  They are also more likely to appreciate the things they do actually have then!

Plan for their further education

Its not free anymore so set aside something, however small, for further education or even driving lessons etc.  A small amount regularly adds up over the years and will make a lot of difference at the time.  Choose saving accounts wisely, think about interest rates and take advantage of any tax free allowances you each are entitled to.

Think about your future too
Think about retirement plans, life insurance and a will too. It all seems so far off when you are young and have small children, but the time will come and its best to have been financially prepared.

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Savings Accounts: Interest vs Flexibility

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One of the most difficult things when it comes to choosing the best savings account or ISA is balancing flexibility with returns. With interest rates currently languishing at very low levels, it is tempting to look for as much interest as you possibly can in order to try and make the best of a bad situation. But the highest-interest accounts usually compromise on flexibility, often by requiring you to leave your money untouched until the end of a given term.

For some people, tying up a portion of their money for a few years is no big deal. But for others, it can be very difficult to know where to strike the balance. Should you settle for little interest in order to keep full access to your funds, or should you give up some flexibility to receive more money in return?

Your Situation

Obviously the single most important thing to consider is your own, personal financial situation. If you have any serious doubts that you can afford to have anything but complete, instant access to your savings you should choose your account accordingly. Lower interest will unfortunately be the price you pay to have the flexibility that you need.

That being said, not all fixed-term accounts completely close off access. By carefully considering the individual account, you may be able to get better interest without putting your financial situation in danger.

Withdrawal Penalties

With a fixed-term account, you won’t necessarily lose access to your funds completely until the term is up. Rather, you will often face withdrawal penalties. These might be an outright charge or, more likely, loss of interest on the funds you withdraw for a set period. This means that, on the funds you withdraw, you effectively get a lower interest rate. However, that interest rate can still be quite attractive compared to true flexible accounts, and if your funds stay in there for a reasonable amount of time before you withdraw it can still allow you to maximise the interest you receive.

This is obviously useful if you need to access your funds before the term is up after all. It is also handy for people who want to seek the best rates. On the face of it, one of the disadvantages to signing up to a long term such as four or five years is that, if interest rates improve midway through the term, you will not be able to take advantage of the new, higher-rate accounts.

Supposing you are in a five year term, with 6 months lost interest as a penalty on withdrawn funds. If you find there are better rates in two years’ time, you can withdraw your funds and lose a quarter of the interest you have accrued. This will almost certainly still result in a better rate than an instant access ISA. It will also often be equal to or better than a two year ISA, with the added bonus that you choose how long you allow the term to continue. Special calculators can help you clarify how rates compare.

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Might you be Due a PPI Refund?

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The PPI scandal is hardly a young one. The original investigation that uncovered the scandal took place in 2005, and the court order that made refunds mandatory was handed down in 2011. Nonetheless, there are still thousands of claims being made every week, and each month sees hundreds of millions of pounds paid out in refunds and compensation.

Many people are only just discovering that they were mis-sold PPI, and many more remain completely unaware. A quick look over the details of the scandal can help you to work out whether you are due a refund.

Who Might be Affected?

In short, anybody who has taken out credit in recent years might have been affected by the scandal. This includes mortgages, credit cards and personal loans to name a few of the most common examples. Payment protection insurance is designed to cover your monthly repayments if you are made redundant (excluding voluntary redundancy). As such, it can theoretically apply to almost any kind of credit agreement and as such it has been sold and mis-sold with a wide range of different loan products.

When can I Claim?

PPI in itself is a legitimate and often useful product, so not everybody who has had a PPI policy of any kind is entitled to a refund. If you were a victim of mis-selling, however, then a refund is your basic legal right. There are several circumstances that lead to a PPI policy being classed as mis-sold. Perhaps the most shocking example is that some people had PPI attached to their credit agreement without even being told. Others were given policies that were unnecessarily comprehensive in order to bump up costs, or that were designed to ensure they would never be eligible for a claim. One of the most common, and arguably most subtle, tactics involved failing to make customers aware of their rights. When taking out credit, you have a right to shop around for a better PPI policy and you should have been told this by your lender. However, many lenders fostered the idea that customers needed to settle for their own PPI policy.

Making a Claim

If any mis-selling tactics were used to sell you a PPI policy, you have a right to make a claim. You can do this yourself or turn to a claims management company to handle your case for you in return for a portion of the money you claim back. If you are unsure where to begin with your claim or which approach to take, you may wish to seek out more information from the PPI Claims Advice Line website.

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High Interest Current Accounts

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People don’t tend to think of current accounts as a savings option. After all, in the vast majority of cases this is an accurate viewpoint. The standard arrangement is that current accounts are for the funds you many need to immediately access, while savings sit in a dedicated savings account amassing a more generous interest rate.

However, there are a few accounts which shake up this traditional state of affairs. High interest current accounts provide you with the same immediate access to your funds as any other current account, but higher interest rates than many savings products. Currently, TSB and Nationwide both offer 5% current accounts, with 2% and 3% products on the market from a range of other suppliers. This can be a hugely beneficial arrangement, but naturally there are also drawbacks to consider such as charges and restrictions.

The Advantages of High Interest Current Accounts

The main advantages of a high interest current account are obvious. It allows you to benefit from a high interest rate, allowing your savings to build up over time, increasing in value over time. Some high-interest current accounts are inflation beating – something which is attractive even in a savings product in the current market – meaning that the value of your savings will grow in real terms

Some high interest current accounts offer rates that rival or even beat savings accounts which require your money to be tied up and inaccessible for a period of some years. However, far from restricting your funds, you will be placing them in a current account and having the same easy access that any other current account would give. Your money can be accessed through your debit cards, cheques, standing orders, online payment systems and all other such means.

The Disadvantages of High Interest Current Accounts

If current accounts offered the same interest as the best savings products with no drawbacks, savings accounts would quickly become obsolete. As you might expect, however, these very solid advantages come with some very definite drawbacks.

Often one drawback is simply a limit on the amount of money that can benefit from the impressive rate on offer. Nationwide’s and TSB’s market-leading 5% rates, for example, only apply to balances of up to £2,500 and £2,000 respectively. In Nationwide’s case, the rate is also only temporary and will drop to 1% after the first year.

Furthermore, there will almost always be a requirement that you pay in a minimum amount each month, often £500 or £1,000.

Some accounts will also have a fee. For example, Santander offer a current account with a respectable 3% interest valid on balances between £3,000 and a generous £20,000. However, as well as a requirement of at least £500 monthly funding there is also a fee of £2 every month.

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